I read a lot of blogs and publications to see what the public says about insurance law, because it reminds me of an important fact: to people who aren’t deeply immersed in insurance coverage law, none of this makes any sense whatsoever. On the surface, insurance coverage does not appear to operate like people expect — it doesn’t comport with their understanding of the way the world should work. But buried beneath the surface, sometimes way down beneath, there are rules and policies that make a whole lot of sense, and it is possible to explain them and how they fit into the order of the world.
So I read with interest this newspaper column in the Lodi News-Sentinel in which the writer appears outraged that the California Court of Appeal overturned a $260,000 jury verdict, and found that State Farm could not be liable for negligent claims investigation where there was no coverage in the first place. I remember seeing this case, Benavides v. State Farm, a couple months ago and didn’t pay it much attention because it seemed like a no-brainer. On reading it now, it still seems like a no-brainer, but I like the court’s explanation: with first party insurance, a negligent investigation can’t frustrate the expectations of the insured, because the insured shouldn’t have any expectations where there is no coverage under the contract to begin with. (See page 10 of the opinion). It’s good to keep in mind how difficult it is for people, some of them judges who read legal briefs in coverage litigation, to understand and accept this concept: merely because someone suffers damage, it does not obligate the insurer to do something about it.